Briefs were filed last week by the “private” and “state” appellants in State National Bank of Big Spring, Texas, et al. v. Lew, et al., the case on appeal to the U.S. Court of Appeals for the D.C. Circuit that includes a challenge to the CFPB’s constitutionality.  In August 2013, the district court granted the CFPB’s and other defendants’ motion to dismiss on standing and ripeness grounds.  

The private appellants are State National Bank of Big Spring (SNB) and the two D.C. area non-profit organizations that joined SNB as plaintiffs when the original complaint was filed in June 2012.  The state appellants are the eleven Republican state Attorneys General who subsequently joined as plaintiffs on the amended complaint filed in September 2012.  In the original complaint, the private plaintiffs challenged the constitutionality of Director Cordray’s recess appointment and also alleged that the CFPB’s structure and authority violated the Constitution’s separation of powers.  The AGs did not join that portion of the amended complaint and instead only joined a newly-added challenge that had nothing to do with the CFPB but dealt with their states’ status as potential creditors of a failed financial institution in the event of an “orderly liquidation” under Title II of Dodd-Frank.  

The private appellants’ brief to the D.C. Circuit is primarily directed at challenging the district court’s holding that SNB lacked standing to challenge the CFPB’s constitutionality based on SNB’s alleged exit from the mortgage business and reduction in its remittance transfer business because of the increased risks and compliance costs resulting from the CFPB’s regulations and UDAAP authority.  According to SNB, its alleged lost profits and increased compliance costs are sufficient injuries to establish standing. 

According to the state appellants, because Title II gives the FDIC, as receiver for a failed financial institution in an orderly liquidation, discretion to discriminate among similarly situated creditors, all creditors lose the right to be repaid equally with other similarly situated creditors.  In their brief to the D.C. Circuit, the state appellants argue that, contrary to the holding of the district court, this loss of legal rights represents an immediate injury to their states as potential creditors that confers standing and also makes their claims ripe.